Postgraduate earnings premium ‘varies hugely across OECD’

Latest data from Education at a Glance suggest taking education to a higher level brings much bigger income returns in some nations 

October 14, 2018
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With more young people than ever gaining bachelor’s degrees, there seems to be a growing belief in some countries that a postgraduate qualification is the only way to truly stand out in the labour market.

But the latest data published by the Organisation for Economic Cooperation and Development suggest that the economic return from studying to a higher level varies considerably among developed nations.

According to figures in Education at a Glance 2018, those with a master’s or doctorate in France and South Korea earn around twice as much as people with a school-leaver qualification only, while in the US they earn more than 130 per cent more.

However, in Sweden, the earnings premium for those with postgraduate degrees is less than 40 per cent and it is only about 50 per cent in Australia and New Zealand.

Nations that have the highest postgraduate premiums are not always those where the bachelor’s degree premium is at its highest either.

For instance, in France, which has one of the biggest gaps in earnings between postgraduate degree-holders and those with only school qualifications, there is only a modest premium for bachelor's graduates compared with other countries. The same is true of South Korea, but Germany, where the postgraduate premium is relatively modest, has an above average bachelor’s premium.

Simon Marginson, professor of higher education at the University of Oxford, said that the figures showed why using graduate premiums to judge the “virtue” of higher education was problematic given the likely influence of factors such as general income inequality in a country.

“US graduate premiums are high in a highly unequal income distribution; Sweden’s are lower in a country with a less stratified income distribution,” he said.

He added that the specific characteristics of countries’ postgraduate education – how many people took such degrees, the types of subjects offered, the requirement by employers for qualifications – also needed to be factored in.

“In Australia, the master’s in particular is a mass degree in a country with medium income inequality. In France, a country with similar levels of income inequality – slightly less inequality in fact – the postgraduate degrees are more elite in role,” he said.

Ittima Cherastidtham, higher education fellow at Australia's Grattan Institute, said there was evidence from university enrolments that Australians were also “much more likely to do their master’s in disciplines with lower earnings”.

“In Australia, a quarter of [taught] master’s students take society and culture/humanities courses. In the UK, the rate is lower at about 20 per cent. The rate seems to be even lower in the US.

“Because these disciplines don’t [tend to lead to higher earnings], it may reduce the overall average earnings of master’s students.”

However, she said another important point about Australia and also, to an extent, New Zealand, was its relatively high minimum wage, which pushed up earnings for those with lower qualification levels.

Meanwhile, Francis Green, professor of work and education economics at the UCL Institute of Education, said much more research needed to be done to pinpoint the reasons for differing premiums.

“This variation is something interesting that should be researched properly, in terms of the quality of the courses offered in different countries, and the supplies and demands in the labour markets. Evidently, for whatever reason, one can conclude that pursuing postgraduate qualifications is well rewarded in some countries, but not all.”


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